Young Military Families Tap Veteran Benefits to Buy Homes in a Hot Real-Estate Market

Eddie Valdivia, 34 and his wife, Vanessa, 36, workers at the Red Cross, bought their first house last October, right in the middle of the pandemic.

It's a three-bedroom, three-bathroom house on a half-acre in Palmdale, California, about 90 minutes outside Los Angeles. Because Eddie is a veteran who served in the Navy for eight years, the couple was able to get a VA purchase loan, which allowed them to buy the house without a down payment.

"That was a big thing," said Valdivia, who also noted that the interest rates on VA loans — which are offered by private lenders and partially backed against default by the Department of Veterans Affairs — were better than standard ones, and that being able to forgo a 20% down payment opened doors for the couple.

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This is just one example of young military families using their veterans' benefits to buy homes even in the red-hot housing market before, during and after the pandemic.

VA purchase loans for Generation Z veterans — generally aged 18 to 24 — were up 123% year over year, according to new data from the VA analyzed by Veterans United. Millennials seeking VA purchase loans were up 16% on the year.

In addition, loans from millennial and Gen Z veterans accounted for 52% of all VA purchase loans made in the first half of 2021, up from 47% a year earlier, the analysis showed.

"The growth is there, and veterans are absolutely planting roots in communities across the country," said Chris Birk, director of education at Veterans United, a lender for homebuyers.

Veteran loan benefits a big help

VA purchase loans are a benefit that have helped many veterans, service members and eligible military spouses buy or refinance homes. Those who get them don't have to put any money down and aren't required to buy private mortgage insurance — a major help to many young homebuyers.

They also offer competitive rates compared to traditional loans. The average interest rate for a 30-year fixed rate VA loan is about 2.75%, according to Bankrate. For a traditional 30-year fixed rate mortgage for non-veterans, the average interest rate is about 3%, Bankrate said.

"It's incredibly beneficial to the buyer," Birk said.

Of course, the red-hot housing market has also made it harder for homebuyers to find houses, mostly due to a lack of inventory. In the super-competitive conditions, some veterans using VA purchase loans have experienced extra difficulty in buying houses due to some misconceptions about the loans.

"Not every home seller is open to considering even just the possibility of entertaining offer from a VA loan," said Birk, adding that in that case, there's not much a veteran can do to convince them otherwise.

"The common misconception is VA loans take forever, and that they're going to fall out and that there's going to be appraisal issues, and that's just not true anymore," said Caitlin Turkovich, a Las Vegas-based branch manager for Union Home Mortgage who works with veteran homebuyers.

What military homebuyers should expect

There are a few things Turkovich recommends to veterans and active duty service members looking to use their VA loan benefit.

The first is to find a lender that's experienced with VA loans and can help ensure the processing goes smoothly and quickly. For example, Turkovich's average closing time with a VA loan is 26 days, compared to 28 days with a traditional loan, she said.

She also said that in today's market, homebuyers should be prepared to make multiple offers on houses before getting one, and know that they have no time to hesitate if they see a house they want to buy.

"There's a line out there that says, 'if you have to sleep on it, you're not going to sleep in it,'" she said.

In addition, people using a VA loan can consider contributing a down payment, if possible, as it will give a discount on funding fees, possibly lower monthly payments and could set the buyer apart from the competition. It's also possible in some states to write a so-called love letter to the seller to express your interest in a house.

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